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Intelsat Announces Fourth Quarter and Full-Year
2019 Results

Feb. 20, 2020

Intelsat S.A.
announced financial results for the three months and
full-year ended
December 31, 2019.

Intelsat
reported total revenue of
$517.0 million and net loss
attributable to
Intelsat S.A.
of
$115.0 million for the three months
ended
December 31, 2019. For the year ended
December 31, 2019,
Intelsat
reported total revenue of
$2,061.5 million and net loss
attributable to
Intelsat S.A.
of
$913.6 million.

Intelsat
reported EBITDA1, or earnings before net
interest, gain on early extinguishment of debt,
taxes and depreciation and amortization, of
$356.0 million and Adjusted EBITDA1
of
$371.3 million, or 72 percent of
revenue, for the three months ended
December 31, 2019. Free cash flow
from operations1 was
$70.2 million.

For the year ended
December 31, 2019,
Intelsat
reported EBITDA of
$1,012.8 million and Adjusted EBITDA
of
$1,481.5 million, or 72 percent of
revenue. Free cash flow from operations was
$38.8 million.

Intelsat’s Chief Executive Officer,
Stephen Spengler, said, “We
delivered on our 2019 plan, exceeding our guidance
for full-year revenue and Adjusted EBITDA. Our
fourth quarter results reflect the contributions of
our new satellites as well as growing revenue
streams generated by our Flex managed services,
benefitting our network services business. Our media
business signed a significant new direct-to-home
television customer contract in
Asia,
while the government services business achieved
important renewals that will support its stability
in 2020.

Spengler concluded, “The draft order issued by
the
Federal Communications Commission on
February 7, 2020 was a major event in
the C-band proceeding. Our near-term focus is on
improving the draft order proposed by the FCC,
obtaining changes that would allow us to quickly
clear spectrum to support 5G deployments in the U.S.
while protecting the video services on which nearly
120 million American homes rely.”

Fourth Quarter and Full-Year 2019 Business
Highlights

Intelsat
provides critical communications infrastructure to
customers in the network services, media and
government sectors. Our customers use our services
for broadband connectivity to deliver fixed and
mobile telecommunications, enterprise, video
distribution and fixed and mobile government
applications.

Network Services

Network services revenue was
$200.2 million (or 39 percent of
Intelsat’s total revenue) for the three months ended
December 31, 2019, a decrease of 1
percent compared to the three months ended
December 31, 2018. The network
services fourth quarter 2019 result included
$7.5 million in reduced revenue
related to the loss of
Intelsat
29e.

Network services revenue was
$770.4 million (or 37 percent of
Intelsat’s total revenue) for the year ended
December 31, 2019, a decrease of 3
percent compared to the year ended
December 31, 2018. The network
services full-year result included
$22.6 million in reduced revenue
related to the loss of
Intelsat
29e.

Media

Media revenue was
$210.6 million (or 41 percent of
Intelsat’s total revenue) for the three months ended
December 31, 2019, a decrease of 9
percent compared to the three months ended
December 31, 2018.

Media revenue was
$883.0 million (or 43 percent of
Intelsat’s total revenue) for the year ended
December 31, 2019, a decrease of 6
percent compared to the year ended
December 31, 2018.

Government

Government revenue was
$96.0 million (or 19 percent of
Intelsat’s total revenue) for the three months ended
December 31, 2019, a decrease of 2
percent compared to the three months ended
December 31, 2018.

Government revenue was
$378.3 million (or 18 percent of
Intelsat’s total revenue) for the year ended
December 31, 2019, a decrease of 3
percent compared to the year ended
December 31, 2018.

Average Fill Rate

Intelsat’s average fill rate at
December 31, 2019 on our
approximately 1,800 36 MHz equivalent station-kept
wide-beam transponders was 78 percent, reflecting
the entry into service of a new satellite, discussed
below. This compares to an average fill rate at
September 30, 2019 of 80 percent on
1,750 transponders. In addition, at
December 31, 2019 our fleet included
approximately 1,200 36 MHz equivalent transponders
of high-throughput Intelsat Epic capacity,
reflecting no change from the prior quarter.

Satellite Launches and Fleet Update

Intelsat had
no satellite launches in the fourth quarter of 2019.
The previously launched
Intelsat 39
entered into service on
October 14, 2019.
Intelsat 39
provides connectivity services for mobile network
operators, enterprises and governmental entities, as
well as aeronautical and maritime mobility service
providers operating in the
Europe,
Africa,
Middle
East and
Asia-Pacific regions.

On
October 9, 2019, Northrop Grumman’s
in-space servicing vehicle, Mission Extension
Vehicle 1, or MEV-1, successfully launched with a
goal of becoming the world’s first instance of
on-orbit satellite servicing. The inaugural mission
of MEV-1 is currently underway, featuring a historic
space rendezvous and docking with
Intelsat
901. The MEV-1 service is expected to provide an
extension of the service life of
Intelsat 901
of up to five years.

Contracted Backlog

At
December 31, 2019, Intelsat’s
contracted backlog, representing expected future
revenue under existing contracts with customers, was
$7.0 billion, as compared to
$7.2 billion at
September 30, 2019.

C-band Proceeding at the
U.S. Federal Communications Commission
("FCC")

On
November 18, 2019, the FCC announced
a decision to pursue a public auction of the C-band
spectrum currently licensed to
Intelsat and
other satellite operators, a change from the private
market solution for which
Intelsat had
been advocating over the past two years.

Subsequent to year-end 2019, on
February 7, 2020, the FCC issued its
draft order in the C-band proceeding. The draft
order sets forth proposed acceleration incentive
payments to certain C-band satellite operators of
$9.7 billion, of which
Intelsat
would receive
$4.85 billion, payable in two
tranches. The draft order also outlines a cost
reimbursement framework that would apply to the
various stakeholders in the proceeding, as well as
technical specifications and other elements.

Our near-term focus is on successfully improving
the draft order proposed by the FCC while preserving
all our rights. There can be no assurance that the
FCC will accept any of our proposed changes to the
order. The next major event in this proceeding is
the vote of the FCC on a final order, which is
currently scheduled to occur on
February 28, 2020. The final order
could be issued later that day.

Financial Results for the Three Months
Ended
December 31, 2019

Total revenue for the three months ended
December 31, 2019 decreased by
$25.8 million to $517.0 million, or 5
percent as compared to the three months ended
December 31, 2018. By service type,
our revenues increased or decreased due to the
following:

Total On-Network Revenues decreased by
$33.2 million, or 7 percent, to
$454.5 million as compared to the
three months ended
December 31, 2018 due to the
following:

Transponder services reported an
aggregate decrease of
$32.7 million, primarily due to a
$15.8 million decrease in revenue
from media customers, a
$12.7 million decrease in revenue
from network services customers and a
$4.2 million decrease in revenue
from government customers. The decline from
media customers was primarily due to a reduction
in revenue from direct-to-home services
delivered in
Eastern Europe and non-renewals of
distribution services in
Latin America and
North America. The decline in network
services was primarily due to non-renewals and
service contractions for enterprise and wireless
infrastructure applications, primarily for
services delivered in
Latin America, including
$8.2 million of lower revenue
stemming from the loss of the
Intelsat
29e satellite, a portion of which moved to
off-network transponder services. These network
services declines were offset in part by
increased revenues in the
Asia-Pacific region supporting
telecommunications infrastructure applications.
The decline in on-network government services
was primarily due to a reclassification of a new
service from on-network to off-network,
described further below.

Managed services reported an
aggregate decrease of
$0.1 million. Managed services
for network services customers increased by
$7.1 million, related to new
revenues from trunking applications and mobility
services. These increases were partially offset
by decreases of
$4.8 million for media services,
primarily related to an early contract
termination reported in the third quarter of
2019, and
$3.9 million resulting from the
Intelsat
29e satellite loss. Managed services for
government customers declined by
$2.4 million, primarily resulting
from non-renewals earlier in 2019 and lower
pricing related to 2018 contract renewals.

Total Off-Network and Other Revenues
increased by
$7.4 million, or 13 percent, to
$62.4 million, as compared to the
three months ended
December 31, 2018 due to the
following:

Transponder, MSS and other Off-Network
services revenues increased by an aggregate
of
$8.0 million to $48.9 million,
primarily due to a
$3.7 million aggregate increase
in off-network services for government
applications, inclusive of the reclassification
of a service from on-network, and a net
$4.3 million increase in revenue
from network services customers, largely due to
a
$4.6 million increase in revenues
from off-network services used for restoration
following the loss of the
Intelsat
29e satellite.

Satellite-related services reported a
decrease of
$0.6 million to $13.5 million,
primarily due to a decline in professional
services provided in support of third-party
launch missions.

Direct costs of revenue (excluding
depreciation and amortization) increased by
$12.0 million, or 14 percent, to
$100.6 million for the three months
ended
December 31, 2019, as compared to the
three months ended
December 31, 2018. The increase was
primarily due to an increase of
$14.2 million in costs incurred in
connection with two uncapitalized satellites that
entered into service in 2019, as well as an increase
of
$4.6 million in third-party capacity
costs incurred as part of the
Intelsat 29e
customer restoration process. Direct costs of
revenue also increased by
$2.6 million due to staff-related
expenses. These increases were partially offset by a
decrease of
$7.5 million in costs largely due to
a reduction in revenue share payable related to one
of our joint venture satellites, and an aggregate
decrease of
$3.4 million in third-party costs
related to our satellite-related services and
network services business.

Selling, general and administrative expenses
increased by
$10.9 million, or 23 percent, to
$58.7 million for the three months
ended
December 31, 2019, as compared to the
three months ended
December 31, 2018. The increase was
primarily due to an increase of
$5.0 million in staff-related
expenses, an increase of
$4.6 million in bad debt expense
largely related to certain customers in the
Europe
and
Africa
regions, and an increase of
$2.3 million in sales and marketing
expenses. These increases were partially offset by a
decrease of
$2.3 million in professional fees
largely due to higher costs incurred in 2018
relating to liability and tax management
initiatives.

Depreciation and amortization expense
decreased by
$12.3 million, or 7 percent, to
$161.8 million for the three months
ended
December 31, 2019, as compared to the
three months ended
December 31, 2018, primarily due to a
decrease of
$9.2 million in depreciation expense
due to the write-off of
Intelsat
29e, and a decrease of
$7.4 million in depreciation expense
due to the timing of certain satellites becoming
fully depreciated. The decreases were partially
offset by an increase of
$3.1 million in depreciation expense
resulting from the impact of a satellite placed in
service in 2019 and an increase of
$2.1 million in depreciation expense
resulting from the impact of certain ground segment
assets placed in service.

Interest expense, net consists of the
gross interest expense we incur, together with gains
and losses on interest rate cap contracts we hold
(which reflect the change in their fair value),
offset by interest income earned and the amount of
interest we capitalize related to assets under
construction. As of
December 31, 2019, we held interest
rate cap contracts with an aggregate notional amount
of
$2.4 billion to mitigate the risk of
interest rate increases on the floating-rate term
loans under our senior secured credit facilities.
The interest rate cap contracts have not been
designated as hedges for accounting purposes.

Interest expense, net decreased by
$7.1 million, or 2 percent, to
$319.9 million for the three months
ended
December 31, 2019, as compared to
$327.0 million for the three months
ended
December 31, 2018. The decrease was
principally due to:

a decrease of
$17.6 million corresponding to a
lower relative decrease in fair value of the
interest rate cap contracts in the fourth
quarter of 2019; and

a decrease of
$2.8 million resulting from
increased interest income largely due to higher
cash balances; partially offset by

a net increase of
$10.0 million primarily resulting
from our refinancing activities in 2018 and
incremental debt raise in 2019; and

an increase of
$4.4 million from lower
capitalized interest, primarily resulting from
decreased levels of satellites and related
assets under construction.

The non-cash portion of total interest expense,
net was
$41.0 million for the three months
ended
December 31, 2019, primarily
consisting of interest expense related to the
significant financing component identified in
customer contracts, amortization and accretion of
discounts and premiums, amortization of deferred
financing fees, and the gain resulting from the
increase in fair value of the interest rate cap
contracts we hold.

Loss on early extinguishment of debt. No
gain or loss on early extinguishment of debt was
recognized for the three months ended
December 31, 2019, as compared to a
loss of
$17.8 million for the three months
ended
December 31, 2018, consisting of the
difference between the carrying value of debt
repurchased and the total cash amount paid
(including related fees and expenses), together with
a write-off of unamortized debt issuance costs and
debt discount and premium.

Other income (expense), net was
$1.7 million of income expense, net
for the three months ended
December 31, 2019, as compared to
other income, net of
$2.2 million for the three months
ended
December 31, 2018. Other expense, net
for the three months ended
December 31, 2019 primarily consisted
of a net loss of
$7.3 million related to a change in
value of certain investments in third parties and
loans held-for-investment in 2019 with no
comparative amounts in 2018, partially offset by
higher foreign exchange rate fluctuation gains of
$1.6 million mainly related to our
business conducted in Brazilian reais and an
increase of
$1.8 million in other miscellaneous
income not associated with our core operations.

Benefit from income taxes was
$11.3 million for the three months
ended
December 31, 2019, as compared to an
immaterial provision for income taxes for the three
months ended
December 31, 2018. The increase in
tax benefit was principally attributable to a
decrease in valuation allowance recorded for our
U.S. subsidiaries, partially offset by the
application of final regulations released by the
U.S. Department of Treasury and the
U.S. Internal Revenue Service related to
the Base Erosion and Anti-Abuse Tax (“BEAT”).

Cash paid for income taxes, net of refunds,
totaled
$3.4 million and
$24.3 million for the three months
ended
December 31, 2018 and 2019,
respectively.

Net Income, Net Income per Diluted Common
Share attributable to
Intelsat S.A.,
EBITDA and Adjusted EBITDA

Net loss attributable to
Intelsat S.A.was
$115.0 million for the three months
ended
December 31, 2019, compared to a net
loss of
$111.3 million for the same period in
2018.

Net loss per diluted common share attributable
to
Intelsat S.A.
was
$0.81 for each of the three months
ended
December 31, 2018 and 2019.

EBITDA was
$356.0 million for the three months
ended
December 31, 2019, compared to
$408.6 million for the same period in
2018, reflecting lower revenue and higher operating
costs, as described above.

Adjusted EBITDA was
$371.3 million for the three months
ended
December 31, 2019, or 72 percent of
revenue, compared to
$417.9 million, or 77 percent of
revenue, for the same period in 2018, reflecting
lower revenue and higher operating costs, as
described above.

Free Cash Flow From Operations

Net cash provided by operating activities was
$92.1 million for the three months
ended
December 31, 2019. Free cash flow
from operations was
$70.2 million for the same period.
Free cash flow from (used in) operations is defined
as net cash provided by operating activities and
other proceeds from satellites from investing
activities, less payments for satellites and other
property and equipment (including capitalized
interest). Payments for satellites and other
property and equipment from investing activities,
net during the three months ended
December 31, 2019 were
$27.6 million, and other proceeds
from satellites were
$5.6 million.

Financial Outlook 2020

Revenue Guidance: We expect full-year 2020
revenue in a range of
$1.930 billion to $1.980 billion.

Adjusted EBITDA Guidance:Intelsat
forecasts Adjusted EBITDA performance for the
full-year 2020 to be in a range of
$1.340 billion to $1.390 billion.
This reflects trends relating to the lower revenue
and increased direct costs of revenue, staff and
marketing costs outlined above.

Capital Expenditure Guidance:Intelsat
issued its 2020 capital expenditure guidance for the
three calendar years 2020-2022 (the “Guidance
Period”). Over the next several years we are in a
cycle of lower required investment, due to timing of
replacement satellites and increased capital
efficiency of satellites being built.

We expect the following capital expenditure
ranges:

2020:
$200 million to $250 million;

2021:
$225 million to $300 million; and

2022:
$225 million to $325 million.

Our capital expenditure guidance includes
capitalized interest. Capitalized interest is
expected to average approximately
$20 million annually during the
Guidance Period.

Intelsat
currently has five satellites covered by our 2020 to
2022 capital expenditure plan, two of which are in
the design and manufacturing phase. For the
remaining three satellites, no manufacturing
contracts have yet been signed. During the Guidance
Period, we plan for an increased proportion of our
capital expenditures to be invested in ground
infrastructure and tools needed to enhance our
delivery of managed services.

Our capital expenditure plan excludes satellites
which we may be required to build should certain
aspects of our C-band proposal to the FCC be
adopted.

By the conclusion of the Guidance Period at the
end of 2022, the net number of transponder
equivalents is expected to increase by a compound
annual growth rate (“CAGR”) of approximately 1
percent, reflecting the net activity of satellites
entering and leaving service during the Guidance
Period. Capital expenditure incurrence is subject to
the timing of achievement of contract, satellite
manufacturing, launch and other milestones.

Cash Taxes: We expect cash taxes to range
from
$30 million to $40 million annually.